An interview with Linda Zhang, founder and CEO of Purview Investments, on her inspiring journey to becoming a leader in quantitative investing and her thoughts on the current ETF landscape.
We live in a society where women are underrepresented in the arenas of science, technology, engineering and math. In financial services, women in senior leadership roles are a rarity. Women involved in senior roles in quantitative investing are veritable unicorns. Linda Zhang is literally a one-in-a-million. She has an inspiring story regarding her journey to becoming a leader in quantitative investing at some very large firms before branching out on her own to start her new firm focused on quantitative strategies tactically allocating ETFs. I spoke with Linda to get her thoughts on the current ETF landscape, the latest on quantitative asset allocation strategies, and what inspired her throughout her career in finance.
How did you get started in financial services?
I’ve always been inclined towards numerical patterns, and I’m fascinated by using them to understand complex issues. I got my PhD in finance. I focused on empirical finance, using financial and economic data to better understand and analyze capital markets and to make sensible investment decisions. I taught an MBA program right after my PhD, while conducting investment research. I was provided an opportunity to join an asset manager as quantitative analyst.
It seems like a lot of your background is quantitative in nature – do you find that women are a rarity?
Yeah, I think so. I think women in finance is a rarity. Minority women in finance is a bigger rarity. And minority women in quantitative finance is even more rare. So, I guess I am a unicorn!
Do you think this has anything to do with women being underrepresented in math?
Yes, I think there is definitely a smaller pool of women in the investment field. As a former head of an investment team it became very clear to me that there was a gender imbalance in terms of the resumes that came to my desk. Out of over 20 resumes that came to me, only a couple were from women. That has to change. Companies have the capacity and responsibility to change the gender imbalance in finance, by actively attracting and more importantly, promoting female talents.
What kinds of things were you doing at the first three firms?
I started as a quant analyst for the central quantitative research team with Baring Asset Management. The experience was like on a boot camp – I worked on all kinds of quantitative investment issues across different investment assets.
My career transitioned from research analysis to portfolio management in multi-asset mutual funds at State Street Research in 2003, later becoming BlackRock after an acquisition in 2005. It was a big transition to go from being a quant analyst to a portfolio manager, from searching for patterns in the past to making investment decisions for the future. This also marked my start managing people – heading up the quantitative research team.
At the time, multi-asset management was a rarity. Most people would pick individual securities. Very few people were actively picking among asset classes. I was involved with product innovation, such as constructing a global macro overlay on top of the multi-asset portfolios. We would apply derivatives, total return swaps and ETFs to scale our macro exposures with efficiency and precision. Later on, at MFS, our group managed $13 billion in multi-asset funds, with long-short global overlays. At Windhaven, the multi-asset strategies were implemented entirely with ETFs, as the ETF industry grew in size and variety.
With all these firms, one thing remained constant: quantitative disciplines have always been part of the investment process. What has evolved over time was the product structures – mutual funds vs. separately managed accounts; and the delivery instruments – in-house funds, portfolios, and then ETFs.
What led you to start Purview and what’s Purview’s focus?
Throughout my corporate career, I’ve always had a dream to build something, where I could apply new thinking based on years of lessons and experiences in asset management. After my last corporate job leading the investment team at Windhaven, I registered Purview Investments in 2017, with the goal to build an active ETF managed solution shop. Many brokerage firms and robo-advisors offer ETF-based strategies at low or no cost. The majority of these offerings are strategic in nature that don’t take active views on the markets. There is a vacuum for truly actively managed ETF solutions. Purview is designed to provide investors with a differentiated alternative.
We’ve just announced the first product launch, Purview Impact Solutions. This is an actively managed global multi-asset strategy built using primarily environmental, social and governance (ESG) ETFs as the underlying blocks. This product allows investors to align their investment goals with ESG principles, such as clean environment, low carbon footprint, gender diversity and healthy living. It’s offered directly to both individual and institutional clients in the form of Separately Managed Accounts. We also seek partners to make our products available through RIAs, family offices and third-party distribution channels.
What are your thoughts on Active vs. Passive?
ETFs are a product structure, just like mutual funds. Both ETFs and mutual funds are 40 Act funds. Each structure can hold either passive or active strategies. Many mutual funds contain active strategies while index mutual funds hold passive contents. Similarly, an ETF as a product structure can hold both passive and active contents. We should not confuse structure with content, nor equate ETFs with “passive”.
I think we are likely to witness a continued rise in ETFs with active content. I advise such ETFs. For example, TETF invests in publicly traded companies in the ETF ecosystem – ETF issuers, exchanges, market makers and research firms. The decisions about index members and weights are based on both rules and recommendations from the index committee.
What do you think the future holds for ETFs?
ETFs have had tremendous flow in the last few years, and a lot of that is at the expense of mutual funds which have experienced outflows. In the last few years, mutual fund AUM has been on the decline while ETFs have continued to grow. There are many reasons for that; we are moving into a direction of more transparency, more cost efficiency, and more trading efficiency.
Yes, fees are certainly part of that, and performance. The majority of mutual funds fail to deliver what they are designed to do.
Where do you see the asset management industry in the next five years?
Just in the last few years, we have seen the tip of iceberg for the asset management industry. I think we are likely to see accelerated changes and, not surprisingly, this has to do with ETFs. ETFs are the innovative disruptor. I think traditional asset management firms have to figure out a way to be part of the change. They can become ETF issuers as well as mutual fund managers. They can also become index providers.
Many traditional asset management firms are struggling with the question of whether they should be part of it, concerned about potential internal cannibalization. But my view is that if you are not changing within, then the entire firm might be at the risk of irrelevance. I would not be surprised to see more mutual fund firms making an entry into the ETF business.
What are some of the biggest digital pain points you’re seeing asset managers experience?
Asset management companies traditionally are not known as technology innovators. I think the biggest pain point is older technology. So much is entrenched in those outdated systems.
Some large companies have thrown large resources at technology innovation. For smaller firms, it might be a good idea to outsource technology innovations to third-party firms. Kudos to companies like Kurtosys, because you’re able to help smaller companies who don’t necessarily have huge resources for technology innovation.
You are a co-founder of Women in ETFs – how did the idea for the group come about?
In my first Inside ETFs conference in January 2013, I ran into Joanne Hill, the head of products at ProShares at the time. I knew her from when I was at BlackRock and she was at Goldman. We noticed how few women were at the conference and what could we do about it. We quickly reached out to like-minded people, Debbie Fuhr, Michelle Mikos and Sue Thompson and launched the group in January 2014. We originally thought that we might get 50 people to connect, inspire and educate. We now have over 3500 members (women and men) around the globe.
We host many educational events; for example, mentorship programs and university outreach programs. We are very proud of hosting the signature Ring the Bells to celebrate the International Women’s Day on March 8 every year, with many stock exchanges participating around the globe. It’s been amazing the way this organization has grown so fast without any paid advertising. We really appreciate the generous corporate sponsorship from so many firms in the ETF industry. The goodwill is very heartwarming.
Did you or do you have a mentor?
I have a few mentors. My first one, my biggest mentor, has always been my mother. She graduated from the best medical university in China. She was both a professor at a medical university and a practicing doctor in various large hospitals. I’ve seen her dedication to her profession, her students, her patients, and her family throughout her career. I’ve learned a great deal from her about being a strong career woman and a caring person at the same time.
My other mentor, whom I met early on in my career, is Kim Goodwin, the CIO of State Street Research. Kim taught me how to make tough decisions. She taught me to believe in my own judgements. We also shared fashion tips.
Any advice for other women interested in making financial services a career?
Follow your passion. Don’t make a lot of assumptions. The world is changing, and we need every woman to be part of the change.
What do you like to do for fun?
It’s very important to make time for your passions. My husband and I enjoy playing golf with our daughter Amy, if we can get time with her. She was just elected as the team captain for the Women’s Golf Team at Columbia University.
I also enjoy yoga and travel. It’s a treat to get all the noise out of my head periodically to focus on what’s most important. I’ve lived in a few countries and speak a couple of languages. My goal is to visit all the countries that Purview has major investment exposures to. Nothing gives you better insights than actually experiencing a place. Not even quantitative analysis.
If you could go back and give your “younger self” any advice, what would it be?
A compliment is often overrated. Believe in yourself.
Thank you, Linda.
About Linda Zhang, PhD:
Linda H. Zhang, Ph.D., is the founder and CEO of Purview Investments, a firm specializing in active ETF managed solutions and ETF product innovation. Linda developed extensive expertise in building ETF managed solutions, ETF research and execution, macro investing, quantitative research and portfolio management. Previously, she served as the Head of Investment Research and Senior PM at Windhaven Investments. She came to the ETF ecosystem from institutional asset management industry. At Blackrock, she was a lead manager for Blackrock’s multi-asset funds, pioneered global macro overlay with futures, SWAPS and ETFs. At MFS, she was a PM for Global Multi-Asset, Absolute Return and Commodities strategies. Linda started her career as a quant analyst at Baring Asset Management, before she became the Head of Quant Research Team and a PM at State Street Research. Linda is a recipient of Top Women in Asset Management Awards 2015 by Money Management Executive. She is a co-founder and a general board member of non-profit Women in ETFs. She is a committee member on the Toroso’s TETF index and the Big Tree Capital’s EMQQ Index. As a champion for public knowledge on investing, she has published in Journal of Investing, Journal of Alternative Investments, CFA Digest, ETF.com. She is also a contributor to business media such as Bloomberg, Financial Times and at industry conferences. She received her B.A. from University of Regina, Canada, a master’s degree in Applied Economics and a Ph.D. in Finance from University of Massachusetts at Amherst. She lives with her family in Manhattan, New York City.